What Is Ethereum?
Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum, and its own programming language, called Solidity.
As a blockchain network, Ethereum is a decentralized public ledger for verifying and recording transactions. The network’s users can create, publish, monetize, and use applications on the platform, and use its Ether cryptocurrency as payment. Insiders call the decentralized applications on the network “dapps.”
As a cryptocurrency, Ethereum is second in market value only to Bitcoin, as of May 2021.1
- Ethereum is an open-source blockchain-based platform used to create and share business, financial services, and entertainment applications.
- Ethereum users pay fees to use dapps. The fees are called “gas” because they vary depending on the amount of computational power required.
- Ethereum has its own associated cryptocurrency, Ether or ETH.
- Its cryptocurrency is now second only to Bitcoin in market value.
Ethereum was created to enable developers to build and publish smart contracts and distributed applications (dapps) that can be used without the risks of downtime, fraud, or interference from a third party.
Ethereum describes itself as “the world’s programmable blockchain.” It distinguishes itself from Bitcoin as a programmable network that serves as a marketplace for financial services, games, and apps, all of which can be paid for in Ether cryptocurrency and are safe from fraud, theft, or censorship.2
Ethereum was launched in July 2015 by a small group of blockchain enthusiasts. They included Joe Lubin, founder of ConsenSys, a blockchain applications developer that uses the Ethereum network. Another co-founder, Vitalik Buterin, is credited with originating the Ethereum concept and now serves as the company’s CEO and its public face. Buterin is sometimes described as the world’s youngest crypto billionaire. (He was born in 1994.)
The Ether cryptocurrency was designed to be used within the Ethereum network. However, like Bitcoin, Ether is now an accepted form of payment by some merchants and service vendors. Overstock, Shopify, and CheapAir are among the online sites that accept Ether as payment.3
Ethereum’s Continuing Evolution
The founders of Ethereum were among the first to consider the potential of blockchain technology for uses beyond the secure trading of virtual currency. Its ETH cryptocurrency was created primarily as a medium of payment for apps built on its platform.
Its invulnerability to hackers and other snoopers has opened up possibilities for the storage of private information from healthcare records to voting systems. Its reliance on cryptocurrency opened up opportunities for programmers to create and market games and business applications on the network.
The Hard Fork
A blockchain may be invulnerable to hacker attacks, but it’s not for lack of trying. In 2016, a malicious actor stole more than $50 million worth of Ether that had been raised for a project called The DAO, a set of smart contracts created by a third party and originating from Ethereum’s software platform. The successful raid was blamed on a third-party developer.
The Ethereum community opted to reverse the theft by creating a “hard fork,” invalidating the existing blockchain and creating a second Ethereum blockchain. The original is known as Ethereum Classic.
As of May 2021, Ethereum was the second-largest virtual currency on the market, behind only Bitcoin.1 The number of ETHs in circulation crossed the 100 million mark back in 2018.9
Unlike Bitcoin, there is no limit to the number of ETHs that can be created.
Ethereum is currently undergoing a long-awaited upgrade known as Ethereum 2.0, which is intended to allow the network to scale up while addressing congestion problems that have slowed it down in the past.10 (In 2017, a game called CryptoKitties single-handedly slowed down transactions on the platform.)